Signs of Trouble for the Nasdaq

Just prior to last Monday's decline -- in other words, when the market was trading at its highs -- my mother called me to ask if she should do some selling. As my mother tends to serve as a contrary indicator, I was quite confused by this: She has a tendency to ask, "Should I sell?" when the market is down, not up.

A few minutes further into the conversation, she threw me another curveball and asked about buying stocks! This time, though, the questions were specific. She inquired about Tesla (TSLA) -- Tesla, for heaven's sake -- as she wondered if Apple (AAPL) was really going to buy it. Now my ears perked up. The next question was whether she should buy Twitter (TWTR). Folks, my mother doesn't even use Facebook (FB), let alone tweet. Yet she wants to buy a social-media stock like Twitter?

There were a few other choice momentum-stock questions, as well. To all of this I responded: "Mom, buy some more Goldman Sachs (GS), not highfliers." She said something about how Goldman doesn't go up like Tesla does.

When I looked at my broad-market statistics this past weekend, I was reminded of that phone call. Those very same momentum have been carrying the Nasdaq for the past several months -- yet those are the stocks that have stalled out in the past week or so. It may just be a blip, but the Nasdaq has underperformed the S&P 500 since Feb. 27. See the below chart of the Nasdaq-S&P ratio.

Of course, there was a similar blip in mid-December: The ratio failed to make a higher high, and then hit a lower low before it zooming higher. But, this time around, if Nasdaq doesn't get in gear soon this will have represented a change in the nature of the market for the first time in months. With my mother asking about momentum stocks, to boot -- well, let's just say it does not bode well for them in the coming weeks.

I am once again fussing over the Nasdaq, and not because of the biotech stocks. (Although we could fuss over them again if you would like!) Rather, I'm concerned about the Nasdaq McClellan Summation Index. A week ago, I noted that was on the verge of halting its rise, only to be saved by Tuesday's rally -- but only on a temporary basis, as it is once again on the verge. Right now, a mere moderate down day would again halt its rise.

So, this indicator has started to huff and puff, even as it is meant to smooth out the day-to-day fluctuations, and this is happening as the market trades near its highs. When these two factors converge, they tend to reflect waning momentum.

Meanwhile, the Nasdaq 100 is currently trading where it had been on Feb. 27,and it's a mere 20 points higher than it was at the Feb. 18 closed (marked by the line on the chart). If folks haven't noticed this already, I am sure they will begin to do so soon.

For now, that 3680 area represents support on the Nasdaq 100. As you can see, moreover, this fills the gap left over from last week's early moves. It seems the action has moved elsewhere for now.

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